Friday, September 09, 2016

Leading Index for Commercial Real Estate shows gain in August

by Bill McBride on 9/09/2016 07:18:00 PM

Note: This index is a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data & Analytics: Dodge Momentum Index Continues Ascent in August

The Dodge Momentum Index grew 1.3% in August to 134.9 (2000=100), from its revised July reading of 133.2. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The move higher in August was the result of a 1.7% increase from July for institutional planning as well as a 1.0% gain for commercial planning. August is the fifth consecutive month that the Momentum Index has increased, marking the longest such streak since the end of 2012 into 2013. The Momentum Index is currently 16% above the same month a year ago, reflecting this growth by major sector – institutional planning up 22% and commercial planning up 11%. That both sectors are showing such improvement suggests that developers are shrugging off sluggish economic data and the uncertainty surrounding the November elections, and moving ahead with plans for new projects.
emphasis added
Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 134.9 in August, up from 133.2 in July.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further increases in CRE spending over the next year.